INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS; Looking Outward, Japan Again Considers a Simpler Yen

By STEPHANIE STROM

Published: November 19, 1999

TOKYO, Nov. 18—
Plans to knock two zeros off the yen are gaining favor here once again.

Mikio Aoki, the Japanese government's chief spokesman, said today that the three-party coalition was considering changing the denomination of the currency, a proposal that has come up numerous times over the last few decades.

This time, however, there is strong momentum behind it. The government's efforts to promote the yen as an international currency are increasing in urgency as Europe's single currency gains in popularity among investors and international corporations.

''We set a target date of January 2002, when the actual circulation of the euro will start,'' said Hideyuki Aizawa, head of a Parliament group set up to study the matter.

Agreeing to change the yen's denomination might also have political implications. A change has been a pet project of the Liberal Party, which has been threatening to leave the three-party governing coalition.

And finally, changing the currency would probably spur economic activity and spending, if only temporarily, a goal that has been the government's primary focus for much of the last decade.

In changing the denomination, 100 yen would become one yen. Today's exchange rate of 105.93 yen to the dollar, for example, would presumably become 1.0593 yen to the dollar, making it a nearly one-to-one exchange.

The change is cosmetic and would not reduce the Japanese currency's foreign-exchange value or purchasing power -- prices would be reduced proportionally. But the yen would seem easier to use in financial transactions simply because the amounts would look smaller and the mathematics would be simpler.

''The idea is not absurd, and I suppose if they're trying to get companies to spend money, this is one way of doing it,'' said Marshall Gittler, head of Asian currency strategy at Bank of America in Hong Kong.

To be sure, some objections to the plan have already been heard. Opponents say that it would suppress consumer spending by causing shoppers to refrain from purchases of products like computers before the change is put into force, and just at a time when Japan is trying to persuade consumers to spend more.

The Finance Ministry has long opposed plans to change the yen's denomination, but its past objections seem to be outweighed now by its fears that the yen will lose stature in the global marketplace, particularly now that the euro is expected to become the dollar's chief competitor.

''If there's a liquid market in dollars and a liquid market in euros, there's a risk of Japan becoming a sort of second-string market,'' Mr. Gittler said. ''They don't want the yen to become the Swiss franc of Asia.''

Changing the currency's denomination ''might have a positive effect in that the yen would be more internationally easy to understand,'' said Takatoshi Ito, deputy vice minister for international finance. 'One dollar, one euro, one yen -- trading somewhere within 10 or 15 percent of each other. It would improve transparency.''

But many international investors and executives have long preferred dollars to yen, and it will probably take more than the absence of a couple of zeros to change that opinion.

Many foreign companies that import Japanese products do not accept invoices denominated in yen, partly because the currency's exchange value tends to be more volatile than some others. Mr. Gittler said he paid a call on a Thai company last week that refused to do business in yen any more. ''A lot of people have gotten burned very badly by volatility, so their hesitation is justified,'' he said.

Japan is not alone in tinkering with its currency. France has fooled around with the franc, and Israel has swapped pounds for shekels and shekels for new shekels. Argentina dumped pesos for australes and then went back to pesos, just two of the currency adjustments it has made in the last 28 years. And from 1984 to 1994, when it adopted the real, Brazil had six different currencies.

In practical terms, the loss here of two zeros could have some economic impact. Companies that would be involved in printing and minting a newly denominated currency, such as paper and ink makers and engravers, would benefit from rising revenue, as would the makers of ledger books and accounting software. Conversely, those companies that would have to adapt their balance sheets, invoices and the like to a slimmer currency would incur costs.

''On the whole, it probably balances out in terms of revenue and costs,'' Mr. Ito said.